At the Open: Stocks Tick Higher; Xerox Plunges 8% on Restructuring

By Ben Levisohn

The S&P 500 has ticked up 0.1% to 1.748.68, while the Dow Jones Industrials have gained 0.4% to 15,480.72.

While jobless claims came in at 350,000, higher than the 340,000 predicted by economists, the data were rendered meaningless by both the shutdown and California’s computer problems. High Frequency Economics’ Jim O’Sullivan explains:

Claims are still up significantly from a 308K average in September, but the September level was depressed by processing delays in California. Catch-up for those delays contributed to the rise in the last couple of reports. The October readings have also been boosted by fallout from the government shutdown–through non-federal workers affected immediately by the shutdown. Unfortunately, the Labor Department has not able to quantify the different items with confidence.

Ex those two special factors, the trend may not be any higher than it was in August–before the delays in California–but we don’t know that for sure. Claims averaged 329K in August, which was down from 341K in July and 351K in the first half of the year.

The narrative goes something like this…The +100% rally from the lows in March 2009 is purely the result of Federal Reserve quantitative easing…At some point, investors will have something akin to a “Road to Damascus” experience and see that stocks are artificially aided by Fed policy…Macro fundamentals are weak, so the end of the world really is nigh…All this resonates strongly with any thinking investor, for the scar tissue around the wounds of the Financial Crisis is still tender and ragged…

…the bear case is – at best – a selective assessment of the facts. It leverages the fact that everyone knows stocks can go down 40% because, well, they have in very recent memory. The short story always sounds smarter than the long case, simply because most people fear loss a lot more than they value gain. That’s Prospect Theory in a nutshell, the only slice of behavioral economics to win a Nobel Prize, and it is worth remembering as you assess anything in your life.

Needless to say, Colas expects the stock market to head higher for the remainder of the year.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.